U.S. Jobless Rate Hits 8.9%, but Pace Eases

Angelica Gomez, left, a bookkeeper who has been out of work for five months gets information from the unemployment insurance phone bank at the Employment Development Department office in Sacramento on Wednesday.Credit
Ken James/Bloomberg News

The American job market remains dreadful and is still worsening, but at a slower pace than before — good news given the stomach-churning events of recent months. The government’s monthly employment report buoyed hopes that the longest, most punishing recession since the Great Depression may be relenting.

Another 539,000 jobs disappeared from the economy in April, and the unemployment rate jumped to 8.9 percent, its highest level in a quarter century, the Labor Department reported Friday. Yet the deterioration was milder than expected, prompting encouraging talk.

“The most intense spate of weakness is probably behind us,” said Michael T. Darda, chief economist at the research and trading firm MKM Partners. “Less bad is always a prelude to good. It’s going to take some time for this economy to get back on its feet, but we might be closer to the recession ending.”

Investors bought into that message, sending stock prices soaring.

A day after the Treasury pronounced American banks healthier than many analysts had anticipated, the jobs report presented the clearest evidence yet that the nation’s economic free fall appears to have been arrested. The acute shock that began last fall with the collapse of the prominent investment bank Lehman Brothers has largely passed. Panic is no longer the dominant motif of American commercial life.

“It’s a confirmation that we’re in the early stages of a turn,” said Ethan Harris, one of the chiefs of United States economic research at Barclays Capital. “We’re getting further and further removed from the confidence shock of last fall.”

But others emphasized that the easing of dire worries, while positive, says nothing about the economy regaining vigor. Crisis may have merely given way to something more ordinary, yet still miserable for tens of millions of people: a continued slog through recession, with demand for goods and services weak and jobs hard to find.

“This is really horrible in any normal context,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “This isn’t recovery. It’s a slowing recession. In any other time other than the recession we’re in, we’d be appalled by these numbers.”

The numbers for April looked good only by comparison with recent months, with February’s net job loss revised up to 681,000, from 651,000, and March’s net losses revised up to 699,000, from 663,000. The rise in the unemployment rate, from 8.5 percent in March, was mostly because more people began seeking jobs who had not previously been looking for work.

The report for April reflected a moderate slowdown in the pace of layoffs, but not an inclination among businesses to hire. The April tally was helped by a surge of government hiring ahead of the Census, while private-sector payrolls dipped by 611,000.

Businesses are expected to cut an additional two million jobs before the economy begins growing again and the unemployment rate ebbs, probably sometime in 2010.

“We’re still in the midst of a recession that was years in the making and will be months or even years in the unmaking,” President Obama said Friday morning, as he announced the expansion of programs to retrain laid-off workers for new careers. “We should expect further job losses in the months to come.”

Labor Secretary Hilda L. Solis said her department was moving to release $750 million to retrain workers in faster-growing areas of the economy like health care, technology and renewable energy.

“There’s a lot of people who lost jobs where those jobs are not coming back,” said Ms. Solis, pointing to the auto industry and other areas of manufacturing.

The labor market is a lagging indicator, economists note, meaning it tends to improve after other parts of the economy. But it is of greatest import to ordinary people — particularly now.

After years of borrowing against soaring home values and tapping credit cards to spend in excess of incomes, millions of Americans are being forced to live on their paychecks. Yet, since the recession began in December 2007, 5.7 million jobs have disappeared. Wage growth has flattened in recent months. This limits the spending needed to generate demand for goods and services, along with more employees at factories, shopping malls and offices.

“We’re seeing fewer people employed, and those who are employed aren’t seeing their earnings power increase,” said Mr. Baker. “It’s tough to see where a recovery can come from.”

Those holding more optimistic outlooks focus on the government-led initiatives to stimulate the economy. A $787 billion spending and tax cut package is beginning to wash through the economy. The Federal Reserve and the Treasury have been pouring money into mortgage markets and other areas, bringing down the costs of borrowing.

“You have monetary and fiscal stimulus the likes of which the world has never seen,” said Mr. Darda.

The question is whether new job losses will overwhelm the benefits of the stimulus spending. Lost wages combined with continued declines in real estate prices could put millions more Americans behind on their mortgages, leaving banks counting fresh losses and prompting them to tighten credit again. That might blunt recovery and exacerbate joblessness. The next few months should clarify whether the Obama administration’s initiatives are enough to avert that.

The latest jobs report serves as a catalogue of household grief. Manufacturing jobs declined by 149,000, employment in professional and business services dropped by 122,000 and construction shed 110,000 jobs. Finance and insurance shrank by 25,000 jobs. Health care added 17,000 jobs, and government payrolls expanded by 72,000.

Those figures do not count the 8.9 million people now working part time because their hours have been cut or they have failed to land full-time jobs. When they are counted along with those who have given up looking for jobs, the so-called underemployment rate reaches 15.8 percent — up from 9.2 percent a year ago.

Among the jobless, 27.2 percent were unemployed for more than six months, the highest figure since the government began tracking such data in 1948.

Catherine Morse of East Mesa, Ariz., is among those suffering. She has been seeking work since she lost her job as a building company administrator six months ago. She has been living on her savings, now dwindling.

“I’ve been looking every day,” she said. “I haven’t been getting anything.”

Businesses will almost surely take a timid approach to hiring, say economists. .

“We’re headed for an unemployment rate above 10 percent,” said Lawrence Mishel, president of the Economic Policy Institute in Washington, adding that the rate “will stay high for quite a while.”

A version of this article appears in print on , on page A1 of the New York edition with the headline: At 8.9%, Unemployment Still Rises, but Pace Slows. Order Reprints|Today's Paper|Subscribe